CITY OF SEATTLE

ORDINANCE __________________

COUNCIL BILL __________________

AN ORDINANCE relating to the Pontedera condominium project, amending provisions of Ordinance 122099, which authorized the sale by the City for multifamily development of property known as Dearborn-Hiawatha Parcels 2a & 2b, at Hiawatha Place South and South Charles Street in the I-90 Redevelopment Project area, to HomeSight or its designee; authorizing the Director of Housing to cancel without payment or further performance the remaining balances of certain loans to the purchaser and HomeSight and to accept from the purchaser certain subordinate notes from home buyers; authorizing the Director of Housing to release remaining unsold units from income restrictions and longterm affordability covenants; authorizing the Director of Housing to make down-payment assistance loans to any lowincome buyers of units in that property, and modifying Housing Funding Policies adopted in Ordinance 124298 for any such loans; and ratifying and confirming prior acts.

WHEREAS, by Ordinance 122099, the City authorized sale of property known as Dearborn

Hiawatha Parcels 2a and 2b to HomeSight, a Washington nonprofit corporation, or its designee for construction of a mixed-use project containing homeownership units, and the City sold the property to 809 Hiawatha Place, LLC ("Purchaser") in 2008, with most of the purchase price deferred under a nonrecourse promissory note that was to be forgiven pro rata through the sale of each of 20 long-term affordable units to a low-income home buyer; and

WHEREAS, improvements identified in Section 3 of Ordinance 122099 as the "Project" have

been completed, and at least 86 of the 94 residential dwelling units therein have been sold to home buyers; and

WHEREAS, Ordinance 122099 and the Purchase and Sale Agreement made pursuant thereto

contain requirements as to the sale of dwelling units in the Project to low-income households and with long-term affordability restrictions, which requirements have proved difficult to fulfill in their entirety leading into the current housing market; and

WHEREAS, such requirements have limited and delayed the sale of remaining dwelling units in

the Project, resulting in the purchaser's and HomeSight's inability to satisfy obligations to Project lenders, thereby risking default; and

WHEREAS, foreclosure by a Project lender would eliminate any low-income requirement and

affordability covenant on the remaining unsold units and terminate HomeSight's ability to seek low-income home buyers; and

WHEREAS, due to adverse changes in the housing market, the value of the remaining unsold

units is substantially less than outstanding indebtedness for construction loans secured with priority over the City's covenant and deed of trust; and

WHEREAS, it is not in the City's interest that completed units, including larger units suitable for

families with children, remain unoccupied pending foreclosure by senior lenders and ultimate resale without low-income restrictions; and

WHEREAS, the Project has successfully provided home ownership to 40 low-income buyers,

including 12 in long-term affordable residences, and the Purchaser has sold more than 60% of the units to persons of color; and

WHEREAS, the City desires to amend certain other terms of Ordinance 122099 and agreements

made pursuant thereto in order to facilitate prompt sale of the remaining units in the Project to promote home ownership, and desires to provide for potential downpayment loans to improve the potential for sales to lowincome home buyers to occur prior to foreclosure by Project lenders; NOW, THEREFORE,

BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS:

Section 1. The City recognizes that 809 Hiawatha Place, LLC ("Purchaser") has met the conditions for satisfaction of 60% of the amount owed under the promissory note dated May 28, 2008 in the original principal amount of $1,012,200, as amended ("Acquisition Note"). Those conditions were set forth in the related Purchase and Sale Agreement authorized by Section 1 of Ordinance 122099 ("PSA") for the sale by the City of the property known as Dearborn-Hiawatha Parcels 2a & 2b (the "Property"), and provided for satisfaction of 5% of the face amount of the Acquisition Note for each unit in the condominium developed on the Property that was sold to an eligible home buyer subject to covenants for long-term affordability. The Director of the Office of Housing or his designee ("Director") is authorized, without payment and without any further sales of units to eligible buyers or sales subject to long-term covenants, to cancel the balance of the Acquisition Note, which is a non-recourse note now secured by only 8 remaining units and subordinate to deeds of trust securing loans exceeding the estimated value of such units. The Director is authorized to execute, for and on behalf of The City of Seattle, an agreement with the Purchaser and HomeSight providing for cancellation of the Acquisition Note balance consistent with this ordinance and on such conditions as the Director deems appropriate.

Setion 2. Section 3 of Ordinance 122099 is hereby amended to read in its entirety as

follows:

Section 3. At time of initial sale of dwelling units to be developed on the Property, at least (( 51 )) 42 % of the dwelling units in the Property , not including live-work units, must be affordable to, and initially occupied by, buyers with incomes at or below 80% of median income. In addition, at least (( 20 )) 12 of those units must have resale restrictions to help ensure those units remain affordable to low-income households for a term as set forth in Section 3.02 of Attachment A. The housing, together with any additional improvements to be developed on the Property with the approval of the Director and all necessary regulatory approvals, are referred to in this ordinance as the "Project".

Section 3. Notwithstanding any provisions of Ordinance 122099, the Director is hereby authorized to release all remaining unsold residential condominium units in the Property from any deed of trust and covenants in favor of the City in order to permit the prompt sale of those units. The Director is further authorized to release the Purchaser from any obligations under the Covenant for Low-Income Housing dated May 28, 2008, as amended, with respect to all of the Property except for those housing units that have been sold as Long-term Affordable Units as defined therein.

Section 4. The Office of Housing made a supplemental loan to the Purchaser of $440,000 under a Bridge Loan Agreement dated April 23, 2010 ("Bridge Loan"), which enabled the Purchaser to complete sales to low-income buyers of 9 of the12 units in the Property that were sold subject to restrictions to assure long-term affordability, while satisfying senior lender requirements. The Bridge Loan effectively funded an average of $48,889 of the third mortgage seller financing ("residual value loans") that was provided to the 9 buyers of these long-term affordable units in addition to the Office of Housing second mortgage loans of up to $70,000 made to the buyer of each of the 12 units. The residual value loans are evidenced by promissory notes from each buyer to the Purchaser, which were assigned to the City as security for the Bridge Loan. The Director is authorized to accept absolute assignments from Purchaser of these 9 residual value loans in full satisfaction of the Bridge Loan, and to acquire the 9 residual value notes and corresponding loan documents. The provision of subsidy in addition to down payment assistance otherwise allowable under the applicable Housing Levy Administrative and Financial Plan, as described in this Section, is ratified and confirmed.

Section 5. As part of the Project workout in 2012, the Office of Housing agreed to provide an additional loan ("Workout Loan") of up to $1,090,000 to Purchaser and Homesight, on terms that allowed the loan balance to be satisfied pro rata on the "Affordable Sale," as defined, of the 31 units then remaining to be sold to low-income home buyers. The City disbursed $690,000 of this loan to enable the Purchaser to refinance development costs originally financed by Wells Fargo and to satisfy a condition to certain concessions by Wells Fargo, and disbursed $50,553.04 to cover the difference between release prices to senior lien-holders and sales proceeds in order to allow sales to be completed. The City acknowledges that the balance owing has been reduced to $190,110.46 by performance under the loan terms. The Director is authorized to cancel the remaining balance owing on the Workout Loan on such conditions as the Director deems appropriate, provided that the Purchaser and HomeSight agree to continue to use their best efforts to sell remaining units in the Property to low-income home buyers to the extent consistent with completion of all sales without undue further delay.

Section 6. The Director is authorized, in order to facilitate any pending or future sales of unsold units in the Property to low-income home buyers, to provide down payment assistance loans, from existing expenditure authority, consistent with the terms of the Homeownership Program Policies section of the Housing Funding Policies adopted in Ordinance 124298, as they apply to assistance for purchase of homes without resale restrictions, except that for purposes of such loans subsection E.2 of that section is modified to read as follows:

2. In order that single-source subordinate mortgages may be provided for the convenience of borrowers, in lieu of assistance from Levy or other City funds and non-City sources to the same borrower, OH may allow a higher amount of City-funded homebuyer assistance, not to exceed $ 100 (( 70 )),000, for a borrower that receives assistance made as part of a project or lending program for which a nonprofit lending agency has obtained commitments of non-City homebuyer subsidy funds, but only if all of the following conditions are satisfied:

a. Non-City subsidy funds provided to such project or program must be used for deferred subordinate mortgages or other assistance that increases the ability of Low Income households to purchase a home.

b. The average amount of City homebuyer assistance for all eligible households benefited by the program, including buyers who do not receive any City-administered funds, may not exceed $45,000.

Section 7. The Director is authorized to execute and deliver such additional documents, which may include amendments to the PSA and related covenants, and to take other actions, as may be necessary or appropriate to implement the intent of this ordinance.

Section 8. The provision of assistance for the Project and home buyers as described in this ordinance, and any acts after the date of passage and pursuant to the authority of this ordinance prior to the effective date of this ordinance, are hereby ratified and confirmed.

Section 9. This ordinance shall take effect and be in force 30 days after its approval by the Mayor, but if not approved and returned by the Mayor within ten days after presentation, it shall take effect as provided by Seattle Municipal Code Section 1.04.020.

Passed by the City Council the ____ day of ________________________, 2014, and signed by me in open session in authentication of its passage this _____ day of _______________, 2014.

_________________________________

President __________of the City Council

Approved by me this ____ day of _____________________, 2014.

_________________________________

Edward B. Murray, Mayor

Filed by me this ____ day of __________________________, 2014.

____________________________________

Monica Martinez Simmons, City Clerk

(Seal)

Thomas Mack OH HomeSight Pontedera ORD May 6, 2014 Version 8